Maybe the best incubator of the worst deals in Wall Street history is happening once again this week in Sun Valley, Idaho — the so-called “summer camp for billionaires” sponsored by investment bank Allen & Co.
High in the mountains at private parties and aboard their private jets, media mavens think big thoughts about what companies they can smash together. The main beneficiaries of their brainstorms aren’t investors, who usually get hosed on these combos. Nor is it consumers, who have weathered increasingly lackluster news and entertainment programming.
Instead, it’s the bankers racking up huge fees — both on the front end when these deals get consummated, and years later when their clients are forced to unwind the misbegotten transactions because of the failing Frankenstein businesses they created.
Full disclosure: I have a special animus for this confab, and it’s not just because I was thrown out a few years back. (That happened after I vociferously defended my Fox Business producer who had run afoul of one of the conference’s weirdly overzealous security guards. Yes, they seem to think harassing reporters at a conference about the media is a good look.)
The bigger reason this confab is a joke, I would submit, is that far too many of the deals hatched at its high-end dinners have been outrageous flops.
I’ll grant that gathering lots of rich and powerful people together at a resort for a few days could have some benefits. It’s fun for Big Media types to sit around trading stories about the good old days, when their programming wasn’t being disintermediated by the likes of Clavicular mashing his face on YouTube, or Joe Rogan opining about UFOs.
But I’m a bottom-line guy, and I can’t help but notice that this conference has given birth to some of the least shareholder-friendly transactions ever recorded.
Sure — I could be missing something. That’s why I tried to contact the people at Allen & Co. to talk me out of this column. But they didn’t because, as I noted earlier, this is a media-banking company that isn’t crazy about nosy media types.
Plus, they don’t have a lot of good material to work with. Proof of just how horrible media dealmaking has become in recent years emerged just last week when Comcast decided to spin off what remains of NBCUniversal into a separate company, fully divesting itself from its much heralded 2009 acquisition.
Sign of bad times
I was an employee of CNBC when it was announced that Comcast would purchase the business news network’s parent NBCU from General Electric. It was a sign of the times: GE increasingly hemorrhaging and needing to downsize the behemoth created by Jack Welch.
Mixing the manufacturing of jet engines with refrigerators, commercial lending and “Saturday Night Live,” it turned out, just wasn’t doing the trick. Investors were selling the stock — so relentlessly, in fact, that Welch’s replacement, Jeff Immelt, would ultimately get ousted and the company totally broken apart.
Yet at the same time, bankers convinced Comcast, a Philadelphia-based cable empire that threw off lots of cash, and its longtime top executive Brian Roberts that another type of conglomerate would work. It was the future of media — or so the pitch went — to combine cable distribution, which Comcast was good at, with lots of content — news, sports and sitcoms — which Comcast wasn’t good at.
Bankers were telling Roberts he was on the verge of the greatest media invention of all time. He spent nearly $30 billion to buy NBCU in a transaction that took two years (he closed his first 51% of the company in 2011, and the rest in 2013). The stock has barely budged since the merger was completed nearly 15 years ago.
Can I guarantee that the ill-fated tie-up was dreamed up at Sun Valley? Probably not, but the deal was discussed there, hot and heavy, as was its carbon copy that went down a few years later when the bean counters at AT&T decided they should own media content and spent $85 billion for Time Warner.
That was such a flop (again — distribution merged with content) that Time Warner was eventually spun out to create Warner Bros. Discovery in 2022. AT&T got back just $41 billion for its trouble. Three years later, with shares of WBD floundering, bankers began chatting about WBD as takeover bait.
Just months after last year’s Sun Valley conference, Paramount Skydance swooped in and purchased WBD for $80 billion. Bankers, including JPMorgan, Evercore and Allen & Co., were said to earn tens of millions of dollars. Now the newly combined company is in the middle of downsizing.
Hopefully, the CEOs and billionaires will enjoy this week’s fireside chats on AI, space travel, curing cancer and whatever else. But when bankers start whispering into their ears, they might want to leave those big ideas in Idaho.
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